MERGER AGREEMENT AND PLAN OF REORGANIZATION made as of the 30th day of
April, 1997, by and between OraLabs, Inc., a Colorado corporation having its
principal place of business at 0000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000
("OraLabs"), Xxxx Xxxxxxxxx, an individual with a residence at 0000 Xxxx Xxxxx
Xxxxxx, Xxxxxxxxx, XX 00000 ("Xxxxxxxxx"), SSI Capital Corp., a New York
corporation having its principal place of business at 000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 ("SSI "), Xxxxxxxx Xxxxxx, an individual
with an address at 000 Xxxxxxxxxx Xxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000
("Xxxxxx"), Xxxxxx X'Xxxxxxx, an individual with an address at 000 Xxxxxxxxxx
Xxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 ("X'Xxxxxxx") and Oralmerge Inc.,
a Colorado corporation having its principal place of business at 0000 Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000 ("Mergerco").
WHEREAS, SSI is authorized to issue 100,000,000 shares ("SSI Common
Shares") of its common stock, par value $.001 per share (the "SSI Common Stock")
of which 1,749,541 shares are issued and outstanding (the "Outstanding SSI
Common Shares"), and is authorized to issue 1,000,000 shares ("SSI Preferred
Shares") of preferred stock, par value $.01 per share (the "SSI Preferred
Stock"), of which no shares are issued or outstanding; and
WHEREAS, OraLabs is authorized to issue 20,000,000 shares (the "OraLabs
Shares") of its common stock, no par value per share ("OraLabs Common Stock"),
of which 15,597,399 OraLabs Shares are issued and outstanding (the "Outstanding
OraLabs Shares") and 20,000,000 shares of Preferred Stock, no par value
("OraLabs Preferred Stock"), of which no shares are issued and outstanding, and
WHEREAS, Mergerco is a wholly owned subsidiary of SSI and is authorized to
issue 100
shares of its common stock, without par value ("Mergerco Shares"), all of which
Mergerco Shares are issued and outstanding and owned by SSI, and
WHEREAS, the respective Boards of Directors of OraLabs and Mergerco
(together, the "Constituent Corporations") deem it advisable and generally to
the advantage and welfare of OraLabs and Mergerco and their respective
shareholders that Mergerco be merged with and into OraLabs under the terms and
conditions hereinafter set forth (the "Merger"), the Merger to be effected
pursuant to the Colorado Business Corporation Act and to be a tax free
reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Code") , and
WHEREAS, SSI desires to offer, issue and sell in a private placement solely
to accredited investors (as defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"))(the "Private
Placement") 650,000 SSI Common Shares (the "Private Placement Shares") at a
price of $.50 per share, as to which Private Placement all parties intend to use
their best efforts to consummate within 30 days after the date hereof.
NOW, THEREFORE, in consideration of the premises, the parties hereto do
mutually agree as follows:
1. Vote on Merger. OraLabs and Mergerco shall each, as soon as practicable
but in no event later than 30 days after the execution and delivery hereof, (i)
cause a special meeting of its shareholders to be called to consider and vote
upon the Merger on the terms and conditions hereinafter set forth, or (ii)
obtain such written consent of its shareholders as is necessary to approve the
Merger. If the Merger is approved in accordance with the laws of the State of
Colorado, subject to the further conditions and provisions of this Agreement, a
closing of this Agreement shall be held within five business days thereafter
(the "Closing"), and an Articles of
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Merger and all other documents or instruments deemed necessary or appropriate by
the parties hereto to effect the Merger shall be executed and filed with the
Secretary of State of the State of Colorado as promptly as possible thereafter.
The Articles of Merger (the "Articles of Merger") so filed shall be
substantially in the form of Exhibit A annexed hereto, with such changes therein
as the Boards of Directors of OraLabs and Mergerco shall mutually approve.
2. Representations, Warranties and Covenants by OraLabs and Xxxxxxxxx.
OraLabs and Xxxxxxxxx, jointly and severally, represent and warrant as follows,
except to the extent set forth on Schedule 1 attached hereto:
(a) OraLabs is, and on the effective date of the Merger (the "Effective
Date") will be a duly organized and validly existing corporation in good
standing under the laws of the State of Colorado, authorized to issue only the
OraLabs Shares and the OraLabs Preferred Stock. There are issued and
outstanding, and on the Effective Date there will be issued and outstanding only
the Outstanding OraLabs Shares, all of which are, and on the Effective Date will
be, duly authorized, validly issued and fully paid and nonassessable. There are
no, and on the Effective Date there will be no, issued or outstanding rights,
options or warrants to purchase OraLabs Shares or any issued or outstanding
securities of any nature convertible into OraLabs Shares. The Outstanding
OraLabs Shares have all been issued pursuant to an appropriate exemption from
the registration requirements of the Securities Act and from any applicable
registration requirements of the various states.
(b) OraLabs has, and on the Effective Date will have no subsidiaries.
(c) OraLabs has, and on the Effective Date will have full power and
authority to enter into this Agreement and, subject to any required shareholder
approval in accordance with the laws of the State of Colorado, to consummate
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the transactions contemplated hereby. This Agreement and the transactions
contemplated hereby have been duly approved by the Board of Directors of OraLabs
and, prior to the Closing Date, by the shareholders of OraLabs. This Agreement
has been duly executed and delivered by OraLabs and constitutes a valid and
binding obligation of each, enforceable against them in accordance with its
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws nor or hereafter in effect
relating to creditors' rights.
(d) OraLabs is qualified as a foreign corporation in all jurisdictions
where its business or ownership of assets so requires. The business of OraLabs
does not require either to be registered as an investment company or investment
adviser as such terms are defined under the Investment Company Act of 1940 and
the Investment Advisers Act of 1940, each as amended.
(e) The consolidated financial statements of OraLabs, consisting of its
Balance Sheets as at December 31, 1995 and 1994, its Statements of Income (Loss)
for the years ended December 31, 1995 and 1994, its Statement of Stockholders'
Equity (Deficit in Assets) for the Two Years Ended December 31, 1995, and its
Statements of Cash Flows for the years ended December 31, 1995 and 1994, have
been audited by independent public accountants and fairly present the financial
position, results of operations and other information purported to be shown
therein of OraLabs, at the date and for the respective periods to which they
apply. The interim financial statements of OraLabs, consisting of its
Consolidated Balance Sheet as at December 30, 1996, and its Consolidated
Statement of Income, its Consolidated Statement of Stockholders' Equity (Deficit
in Assets) and its Consolidated Statement of Cash Flows, for the twelve months
ended December 30, 1996, fairly present the financial position, results of
operations and other information purported to be shown therein of OraLabs, at
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the date and for the respective periods to which they apply, subject to normal
audit adjustments. All such financial statements have been prepared in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved and have been adjusted for all normal and
recurring accruals. All such financial statements (together, the "OraLabs
Financial Statements") are incorporated in and made a part hereof and have been
made part of the OraLabs Offering Information (as hereinafter defined).
(f) Since December 30, 1996, the business of OraLabs has only been operated
in the ordinary course. There has not been, and on the Effective Date there will
not have been in the aggregate any material adverse change in the condition,
financial or otherwise, of OraLabs from that set forth in the OraLabs Financial
Statements, except as expressly provided in writing to SSI by OraLabs.
(g) Except for (i) transactions occurring in the ordinary course of
business, and (ii) as described in writing to SSI by OraLabs, there has not been
and on the Effective Date there will not have been any transactions involving
OraLabs since December 30, 1996 that might have had or might have a material
adverse effect on the business or financial condition of OraLabs, taken as a
whole.
(h) There are, and on the Effective Date will be no liabilities (including,
but not limited to tax liabilities) or claims against OraLabs (whether such
liabilities or claims are contingent or absolute, direct or indirect, matured or
unmatured) not appearing on the OraLabs Financial Statements which are not
described in writing to SSI by OraLabs, other than appraisal rights accruing to
shareholders of OraLabs as a result of the Merger, if any, and other than
liabilities incurred in the ordinary course of business or taxes incurred on
earnings since December 30, 1996.
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(i) All federal, state, county and local income, excise, property and other
tax returns required to be filed by OraLabs have been filed and all required
taxes, fees or assessments have been paid or an adequate reserve therefor has
been established in the OraLabs Financial Statements. The income tax returns of
OraLabs have never been audited by any governmental or quasi-governmental
authority or public agency empowered to do so.
(j) Except as provided for in the OraLabs Financial Statements, and except
as described in writing to SSI by OraLabs, OraLabs has, and on the Effective
Date will have good and marketable title to all of its furniture, fixtures,
equipment and other assets as set forth in the OraLabs Financial Statements and
such assets are owned free and clear of all security interests, pledges, liens,
restrictions and encumbrances of every kind and nature, except as set forth in
the OraLabs Financial Statements or in writing to SSI by OraLabs.
(k) OraLabs is the owner of the inventory as set forth in the OraLabs
Financial Statements and has good and marketable title thereto. Such inventory
is clean, current and saleable in the ordinary course of business.
(l) The accounts receivable as set forth in the OraLabs Financial
Statements represent amounts due for goods sold or services rendered by OraLabs
in the ordinary course of business and, except as reserved for as bad debt in
the OraLabs Financial Statements, are presently expected to be collectable in
the ordinary course of business.
(m) A copy of all agreements, contracts, arrangements, understandings and
commitments, whether written or oral (collectively, "Contracts"), to which
OraLabs is, or on the Effective Date will be a party, or from which OraLabs will
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receive substantial benefits, and which are material to OraLabs, has been
delivered to Mergerco and SSI. OraLabs is not, nor will it be on the Effective
Date in material default under any Contract. The validity and enforceability of
and rights of OraLabs contained in each such Contract shall not be adversely
effected by the Merger or the transactions contemplated hereby.
(n) There are, and on the Effective Date there will be no legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against OraLabs, or challenging the validity or
propriety of the transactions contemplated by this Agreement and, to OraLabs'
best knowledge, there is no reasonable basis for any other proceeding, claim,
action or governmental investigation against OraLabs. OraLabs is not a party to
any order, judgment or decree which will, or might reasonably be expected to,
materially adversely affect the business, operations, properties, assets or
financial condition of OraLabs, taken as a whole.
(o) Except as otherwise disclosed in writing to SSI by OraLabs or on the
schedules hereto, since December 30, 1996 there have been, and through the
Effective Date there will be (i) no bonuses or extraordinary compensation to any
of the officers or directors of OraLabs, (ii) no loans made to or any other
transactions with any of the officers or directors of OraLabs or their families,
(iii) no dividends or other distributions declared or paid by OraLabs, and (iv)
no purchase by OraLabs of any of its capital shares.
(p) OraLabs has, and on the Effective Date will have maintained casualty
and liability policies and other insurance policies with respect to its business
which OraLabs believes are appropriate for OraLabs. Copies of all of the
policies of insurance and bonds presently in force with respect to OraLabs,
including without limitation those covering properties, buildings,
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machinery, equipment, worker's compensation, officers and directors and public
liability, shall be delivered to Mergerco upon written request. All such
insurance is outstanding and in full force and effect, with all premiums thereon
duly paid and OraLabs have not received any notice of cancellation of any such
policies.
(q) OraLabs has, and on the Effective Date will have no patents, patent
applications, trademarks, trademark registrations or applications therefor,
trade names, copyrights, copyright registrations or applications therefor, or
other intellectual property, except as set forth and described in writing to SSI
by OraLabs.
(r) Since its inception, OraLabs has, and on the Effective Date will have
in all material respects operated its business and conducted its affairs in
compliance with all applicable laws, rules and regulations, except where the
failure to so comply did not have and would not be expected to have a material
adverse effect on OraLabs business or property.
(s) Except as described in writing to SSI by OraLabs, there are, and on the
Effective Date there will be no loans, leases or other Contracts outstanding
between OraLabs and any officer or director of OraLabs or any person related to
any officer or director of OraLabs. The parties acknowledge that OraLabs and
Xxxx Xxxxxxxxx are parties to that certain Lease, dated as of September 1, 1995,
with respect to the premises known as 0000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, XX
(the "Lease"). The terms of the Lease are commercially reasonable for the
premises and are comparable to rental and other terms which OraLabs could obtain
for similar premises on an arm's-length basis. The Board of Directors of OraLabs
has determined that the terms and conditions of the Lease are fair to OraLabs.
(t) Except as described in writing to SSI by OraLabs, during the past five
year period, neither OraLabs, any officer or director of OraLabs, nor any person
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intended to become an officer or director of OraLabs or as a nominee of OraLabs
to become a director of SSI upon the Merger, has been the subject of:
(1) a petition under the Federal bankruptcy laws or any other
insolvency law or has a receiver, fiscal agent or similar officer been appointed
by a court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he was an executive
officer at or within two years before the time of such filing;
(2) a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations which do not relate to
driving while intoxicated or driving under the influence);
(3) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining him from, or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the United States
Commodity Futures Trading Commission or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice in connection
with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation of
Federal, state or other securities laws or commodities laws;
(4) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any Federal, state or local authority barring,
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suspending or otherwise limiting for more than 60 days the right of such person
to engage in any activity described in the preceding sub-paragraph, or to be
associated with persons engaged in any such activity;
(5) a finding by a court of competent jurisdiction in a civil action
or by the Securities and Exchange Commission (the "Commission") to have violated
any securities law, regulation or decree and the judgment in such civil action
or finding by the Commission has not been subsequently reversed, suspended or
vacated; or
(6) a finding by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated. All items described in clauses (1) through (6) above are
collectively referred to herein as "Bad Events."
(u)raLabs has no pension plan, profit sharing or similar employee benefit
plan except the 1997 Stock Plan of OraLabs, Inc., in the form delivered to SSI
(the "Stock Plan"). The Stock Plan authorizes the issuance of options to acquire
no more than 1,000,000 shares of OraLabs Common Stock.
(v) Except for the consent and approval of the shareholders of Mergerco and
OraLabs and the filing of the Articles of Merger, no consents or approvals of,
or filings or registrations with, any third party or any public body or
authority are necessary in connection with (i) the execution and delivery by
OraLabs of this Agreement and (ii) the consummation by OraLabs of the Merger and
by OraLabs of the other transactions contemplated hereby.
(w) OraLabs and Xxxxxxxxx know of no person who rendered any service in
connectionwith the introduction of SSI, Mergerco or OraLabs to each other, other
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than Xxxxxx, X'Xxxxxxx and Xxxxxxxx Xxxxxxxxx (the "Finders"), who are being
compensated through a separate agreement between themselves and SSI, and that
they know of no claim by anyone other than the Finders for a "finder's fee" or
similar type of fee in connection with the Merger and the other transactions
contemplated hereby.
(x) No employees of OraLabs are on strike or threatening any strike or work
stoppage. OraLabs has no obligations under any collective bargaining or labor
union agreements. OraLabs is not involved in any material controversy with any
of its employees or any organization representing any of its employees.
(y) A true and complete list of each bank account, lock box and safe
deposit box maintained by OraLabs and the names of persons authorized to draw
thereon or withdraw therefrom has been provided to Mergerco.
(z) None of the information supplied or to be supplied by or about OraLabs
for inclusion or incorporation by reference in the OraLabs Offering Information
or in any information supplied to Xxxxxxxxx concerning the Merger contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(aa) The execution and delivery by OraLabs of this Agreement, the
consummation and performance of the transactions herein contemplated, and
compliance with the terms of this Agreement by OraLabs will not conflict with,
result in a breach of or constitute a default under any indenture, mortgage,
deed of trust or other agreement, instrument or Contract to which OraLabs is now
a party or by which it or any of its assets or properties is bound or the
Certificate of Incorporation, as amended, or the bylaws of OraLabs, in each case
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as amended, or any law, order, rule or regulation, writ, injunction, judgment or
decree of any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over OraLabs or any of their respective business or
properties.
(bb) The 1990 partnership agreement of Amazing White, Ltd. (the
"Partnership"), as to which OraLabs was a general partner, has been terminated
in all respects, and OraLabs has no liabilities or obligations resulting from
the Partnership either to third parties, to the Partnership or to any partner or
former partner of the Partnership.
(cc) Through the date hereof, OraLabs has no loans outstanding from
Colorado Community First National Bank of Englewood, Colorado pursuant to its
line of credit with such bank.
(dd) OraLabs' consulting agreement with Xxxxx Xxxxxxxxxx (the "Xxxxxxxxxx
Agreement") has been terminated in all respects, and OraLabs has no liabilities
or obligations resulting from the Xxxxxxxxxx Agreement.
(ee) The shareholders agreement, dated August 1, 1990, by and among
Xxxxxxxxx and two other individuals (the "Shareholders Agreement") has been
terminated in all respects, and neither OraLabs nor Xxxxxxxxx has any
liabilities or obligations resulting from the Shareholders Agreement.
(ff) The Ice Drops (R) product and name are validly owned by OraLabs, and
were not sold to DEN-MAT Corporation ("DEN-MAT") in the Asset Purchase Agreement
by and between DEN-MAT and OraLabs dated April 6, 1994.
(gg) OraLabs has duly and validly obtained all industrial alcohol user
permits and related permits, consents and approvals for its use of spirits in
its products.
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3. Representations and Warranties relating to Mergerco. Mergerco and SSI,
jointly and severally, represent and warrant as follows:
(a) Mergerco is, and on the Effective Date will be a duly organized and
validly existing corporation in good standing under the laws of the State of
Colorado, authorized to issue only the Mergerco Shares. On the Effective Date
there will be issued and outstanding all of the Mergerco Shares which shall be
fully paid and nonassessable and which shall be owned by SSI. There are no, and
on the Effective Date there will be no issued or outstanding options or warrants
to purchase Mergerco Shares or any issued or outstanding securities of any
nature convertible into Mergerco Shares.
(b) Mergerco has been organized solely for the purpose of consummating the
Merger and, since its inception, Mergerco has had no business activity of any
nature other than those related to its organization or as contemplated by this
Agreement.
(c) Mergerco has, and on the Effective Date will have full power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the transactions contemplated hereby
have been duly approved by the Board of Directors of Mergerco.
(d) Mergerco is, and on the Effective Date will be duly authorized,
qualified, and licensed under any and all applicable laws, regulations,
ordinances, or orders of public authorities to carry on its business in the
places and in the manner as presently conducted or as contemplated in this
Agreement. The business of Mergerco does not require it to be registered as an
investment company or investment adviser as such terms are defined under the
Investment Company Act and the Investment Advisers Act of 1940, each as amended.
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(e) Mergerco has, and on the Effective Date will have no subsidiaries.
(f) Except for (i) the incurring of expenses of its organization, (ii) the
issuance of the Mergerco Shares to SSI, (iii) the incurring of expenses relating
to this Agreement and the consummation of the transactions contemplated by this
Agreement, and (iv) the consummation of the Merger, Mergerco has had, and on the
Effective Date will have had no business and no financial or other transactions
of any nature whatsoever.
(g) Mergerco has, and on the Effective Date will have no liabilities
(including, but not limited to, tax liabilities) nor are there, or on the
Effective Date will there be, any claims against Mergerco (whether such
liabilities or claims are contingent or absolute, direct or indirect, and
matured or unmatured) except for liabilities for its organization expenses or
expenses incurred in connection with the Merger.
(h) All federal, state, county and local income, excise, property or other
tax returns required to be filed by Mergerco have been filed and all required
taxes, fees or assessments have been paid.
(i) Mergerco has, and on the Effective Date will have no fixtures,
furniture, equipment, inventory or accounts receivable.
(j) Mergerco has, and on the Effective Date will have no contracts and
commitments to which it is, or on the Effective Date will be a party, except for
this Agreement and other documents and instruments contemplated hereby in
connection with the Merger.
(k) There are, and on the Effective Date there will be no legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against Mergerco, or challenging the validity or
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propriety of the transactions contemplated by this Agreement and, to Mergerco's
and SSI's best knowledge, there is no reasonable basis for any other proceeding,
claim, action or governmental investigation against Mergerco. Mergerco is not a
party to any order, judgment or decree which will, or might reasonably be
expected to, materially adversely affect the business, operations, properties,
assets or financial condition of Mergerco.
(l) Since the inception of Mergerco there have been, and to the Effective
Date there will be (i) no salaried or otherwise compensated employees and no
bonuses paid to any officer or director of Mergerco; (ii) no loans made to or
any transactions with any officer or director of Mergerco; (iii) no dividends or
other distributions declared or paid by Mergerco; and (iv) no purchase by
Mergerco of any Mergerco Shares.
(m) Since its inception, Mergerco has not issued or committed itself to
issue, and to the Effective Date will not issue or commit itself to issue any
Mergerco shares or any options, rights, warrants, or other securities
convertible into Mergerco Shares except for the issuance of the Mergerco Shares
to SSI.
(n) Mergerco has no patents, patent applications, trademarks, trademark
registrations, tradenames, copyrights, copyright registrations or applications
therefor.
(o) Since its inception, Mergerco has, and on the Effective Date, will have
in all material respects conducted its affairs in compliance with all applicable
laws, rules and regulations.
(p) During the past five year period, no officer or director of Mergerco
has been the subject of any Bad Event.
(q) Mergerco has no pension plan, profit sharing or similar employee
benefit plan.
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(r) Except for the consent and approval of the shareholders of Mergerco and
OraLabs and the filing of the Articles of Merger, no consents or approvals of,
or filings or registrations with, any third party or any public body or
authority are necessary in connection with (i) the execution and delivery by
Mergerco of this Agreement and (ii) the consummation by Mergerco of the Merger
and the other transactions contemplated hereby.
(s) Mergerco knows of no person who rendered any service in connection with
the introduction of SSI, Mergerco or OraLabs to each other, other than the
Finders, who are being compensated through a separate agreement between
themselves and SSI, and that they know of no claim by anyone other than the
Finders for a "finder's fee" or similar type of fee in connection with the
Merger and the other transactions contemplated hereby.
(t) Mergerco has no employees.
(u) The execution and delivery by Mergerco of this Agreement, the
consummation and performance of the transactions herein contemplated, and
compliance with the terms of this Agreement by Mergerco will not conflict with,
result in a breach of or constitute a default under any indenture, mortgage,
deed of trust or other agreement, instrument or Contract to which Mergerco is
now a party or by which it or any of its assets or properties is bound or the
Certificate of Incorporation, as amended, or the bylaws of Mergerco, in each
case as amended, or any law, order, rule or regulation, writ, injunction,
judgment or decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over Mergerco or any of its business or
properties. 4. Representations and Warranties relating to SSI. SSI and Mergerco,
jointly and severally, and each of X'Xxxxxxx and Xxxxxx, severally and not
jointly, represent and warrant as follows:
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(a) SSI is a duly organized and validly existing corporation in good
standing under the laws of the State of New York, authorized to issue only
100,000,000 shares of SSI Common Stock and 1,000,000 shares of SSI Preferred
Stock. SSI, on the Effective Date, will be a duly organized and validly existing
corporation in good standing under the laws of the State of New York, authorized
to issue only 100,000,000 shares of SSI Common Stock and 1,000,000 shares of SSI
Preferred Stock. On the Effective Date but prior to the consummation of the
Private Placement there will be issued and outstanding 1,749,541 shares of SSI
Common Stock and no shares of SSI Preferred Stock, all of which issued and
outstanding shares will be fully paid and nonassessable. Except as contemplated
by this Agreement, there are no, and on the Effective Date there will be no
issued or outstanding options, warrants or other rights, contingent or
otherwise, to purchase or acquire shares of SSI Common Stock or any issued or
outstanding securities of any nature convertible into shares of SSI Common
Stock. No preemptive rights or cumulative voting rights exist as to any shares
of SSI Common Stock or SSI Preferred Stock. To the Company's knowledge, there
are no voting trust, voting rights or similar agreements existing with respect
to any shares of SSI Common Stock or SSI Preferred Stock except as contemplated
hereby.
(b) Since its emergence from bankruptcy in July 1991, the business of SSI
has been limited to the search for an acquisition or merger partner and, except
for transactions related thereto or activities related to its obligations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), it has not
engaged in any other business or activity.
- 17 -
(c) SSI is, and on the Effective Date will be duly authorized, qualified
and licensed under any and all applicable laws, regulations, ordinances, or
orders of public authorities to carry on its business in the places and in the
manner as presently conducted. The business of SSI does not require it to be
registered as an investment company or investment advisor as such terms are
defined under the Investment Company Act and the Investment Advisors Act of
1940.
(d) SSI has, and on the Effective Date will have no subsidiaries except for
Mergerco.
(e) The financial statements of SSI, consisting of its Balance Sheets as at
November 30, 1996, 1995 and 1994, and its Statement of Operations, its Statement
of Stockholders' Equity and its Statement of Cash Flows from July 1991
(inception) to November 30, 1996, all together with accompanying notes, have
been audited by independent public accountants and fairly present the financial
position, results of operations and other information purported to be shown
therein of SSI, at the date and for the respective periods for which they apply.
The interim financial statements of SSI, consisting of its Balance Sheet as at
August 31, 1996, its Statement of Income, Statement of Stockholders' Equity and
Statement of Cash Flows for the period from inception to August 31, 1996, fairly
present the financial position, results of operations and other information
purported to be shown therein of SSI, at the date and for the respective periods
to which they apply. All such financial statements have been prepared in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved and have been adjusted for all normal and
recurring accruals. All such financial statements (together, the "SSI Financial
Statements") have been delivered to OraLabs and are true and complete in all
respects.
(f) Since November 30, 1996, the business of SSI, as described in SSI's
Form 10-K Annual Report for the year ended November 30, 1996, has only been
- 18 -
operated in the ordinary course. There has not been, and on the Effective Date
there will not have been any material change in the financial condition of SSI
from that set forth in the SSI Financial Statements except for (i) transactions
in the ordinary course of business and (ii) transactions relating to this
Agreement, and the incurring of expenses or liabilities relating to this
Agreement.
(g) There are, and on the Effective Date will be no liabilities (including,
but not limited to, tax liabilities) or claims against SSI (whether such
liabilities or claims are contingent or absolute, direct or indirect, and
matured or unmatured) not appearing on the SSI Financial Statements, except for
(i) liabilities for expenses incurred relating to this Agreement and the
consummation of the transactions contemplated by this Agreement (ii) liabilities
and commitments incurred or made in the ordinary course of SSI's business or
taxes incurred on earnings since November 30, 1996.
(h) All federal, state, county and local income, excise, property or other
tax returns required to be filed by SSI have been filed and all required taxes,
fees or assessments have been paid or an adequate reserve therefor has been set
up in the SSI Financial Statements.
(i) SSI has, and on the Effective Date will have no fixtures, furniture,
equipment, inventory or accounts receivable.
(j) SSI, has, and on the Effective Date will have no Contracts to which it
is, or on the Effective Date will be a party, except (i) as described in the SSI
Financial Statements, (ii) to the extent related to filing and other
requirements associated with SSI's obligations under the Exchange Act and (iii)
to the extent related to SSI's bankruptcy proceedings which were completed in
July 1991.
- 19 -
(k) There are, and on the Effective Date there will be no legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against SSI, or challenging the validity or
propriety of the transactions contemplated by this Agreement and, to Mergerco's
and SSI's best knowledge, there is no reasonable basis for any other proceeding,
claim, action or governmental investigation against SSI. SSI is not a party to
any order, judgment or decree which will, or might reasonably be expected to,
adversely affect the business, operations, properties, assets or financial
condition of SSI.
(l) Since November 30, 1996, there have been, and to the Effective Date
there will be (i) no salaried or otherwise compensated employees and no payments
made to any officer or director of SSI; (ii) no loans made to or transactions
with any officer or director of SSI; (iii) no dividends or other distributions
declared or paid by SSI; and (iv) no purchase by SSI of any of its common
shares.
(m) Since November 30, 1996, SSI has not issued or committed itself to
issue, and to the Effective Date will not issue or commit itself to issue any
additional common shares or any options, rights, warrants, or other securities
convertible into common shares, except as contemplated by this Agreement.
(n) SSI has furnished to OraLabs true and complete copies, including
exhibits and, as applicable, amendments thereto, of (i) SSI's Registration
Statement for its initial public offering; (ii) the Prospectus contained
therein; (iii) [intentionally omitted] (iv) SSI's Annual Reports on Form 10-K
for the years ended November 30, 1996, 1995 and 1994; (v) SSI's Quarterly Report
on Form 10-Q for the quarters ended February 29, 1996, May 31, 1996 and August
31, 1996; (vi) upon written request by OraLabs, copies of all correspondence
with the Securities and Exchange Commission in connection with SSI's initial
- 20 -
public offering; (vii) upon written request by OraLabs, copies of all documents
filed pursuant to state "blue sky" laws and rules and regulations promulgated
thereunder and copies of all correspondence with state agencies having
jurisdiction over the offer and sale of share of SSI Common Stock; and (viii)
all materials relating to SSI's proceedings in bankruptcy.
(o) SSI has no patents, patent applications, trademarks, trademark
registrations, trade names, copyrights, copyright registrations or applications
therefor.
(p) Since its emergence from bankruptcy in July 1991, and, to SSI's
knowledge, prior thereto, SSI has, and on the Effective Date, will have in all
material respects operated its business and conducted its affairs in compliance
with all applicable laws, rules and regulations.
(q) There are, and on the Effective Date there will be no loans, leases or
other contracts outstanding between (i) SSI and (ii) any officer or director of
SSI or any person related to any officer or director of SSI.
(r) No current officer or director of SSI has been the subject of any Bad
Event.
(s) SSI has no pension plan, profit sharing or similar employee benefit
plan.
(t) Except for the consent and approval of the shareholders of Mergerco and
OraLabs and the filing of a Articles of Merger, no consents or approvals of, or
filings or registrations with, any third party or any public body or authority
are necessary in connection with (i) the execution and delivery by SSI of this
Agreement and (ii) the consummation of the Merger and the other transactions
contemplated hereby.
(u) SSI knows of no person who rendered any service in connection with the
introduction of SSI, Mergerco or OraLabs to each other, other than the Finders,
who are being compensated through a separate agreement between themselves and
- 21 -
SSI, and that it knows of no claim by anyone other than the Finders for a
"finder's fee" or similar type of fee in connection with the Merger and the
other transactions contemplated hereby.
(v) SSI has no employees.
(w) None of the information supplied or to be supplied by or about SSI in
connection with this Agreement contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
(x) The execution and delivery by SSI of this Agreement, the consummation
and performance of the transactions herein contemplated, and compliance with the
terms of this Agreement by SSI will not conflict with, result in a breach of or
constitute a default under any indenture, mortgage, deed of trust or other
agreement, instrument or Contract to which SSI is now a party or by which it or
any of its assets or properties is bound or the Certificate of Incorporation, as
amended, or the bylaws of SSI, in each case as amended, or any law, order, rule
or regulation, writ, injunction, judgment or decree of any government,
governmental instrumentality or court, domestic or foreign, having jurisdiction
over SSI or any of its business or properties.
(y) All issuances of securities contemplated to be issued by SSI's Amended
Plan of Reorganization dated June 15, 1990 (the "Plan") were duly and validly
issued.
(z) SSI attempted to make payments of approximately $25,000 (the
"Uncollected Funds") to creditors under the Plan where checks were returned to
SSI as undeliverable. While no final determination has been made, SSI believes
that the Uncollected Funds might have
- 22 -
escheated to the State of New York and may be required to be delivered thereto.
OraLabs confirms that it is consummating the Merger regardless of whether the
Uncollected Funds do or do not escheat to the State of New York.
(aa) Neither Xxxxxx, X'Xxxxxxx nor SSI is aware of any contingent or other
liabilities accruing to SSI by virtue of its one-time interest in LPG
Standardbred Associates, Inc. or Niavest, L.P.
(bb) To the best knowledge of Xxxxxx, X'Xxxxxxx and SSI, the form of
By-laws filed as an exhibit to SSI's Registration Statement on Form S-18
represent the current By-laws of SSI, and to such individuals' and entities'
knowledge, such By-laws have not been modified or amended since their adoption.
5. Representations to Survive Closing. All of the representations and
warranties contained in this Agreement (including all statements contained in
any certificate or other instrument delivered by or on behalf of OraLabs, SSI or
Mergerco pursuant hereto or in connection with the transactions contemplated
hereby) shall survive the Closing.
6. Surviving Corporation. The surviving corporation shall be OraLabs. Its
name, identity, certificate of incorporation, by-laws, existence, purposes,
powers, objects, franchises, rights and immunities shall be unaffected and
unimpaired by the Merger, except as described in the Articles of Merger.
7. Treatment of Shares of Constituent Corporations. The terms and
conditions of the Merger, the mode of each of the Constituent Corporations and
SSI carrying the same into effect, and the manner and basis of converting the
common shares and other securities of each of the Constituent Corporations are
as follows:
- 23 -
(a) All Mergerco Shares currently issued and outstanding to SSI shall
be converted into an equal number of OraLabs Shares by virtue of the Merger and
without any action on the part of the holder thereof on the basis of one OraLabs
Common Share for each Mergerco Share. After the Effective Date, SSI, as the
holder of Mergerco Shares outstanding prior to the Merger shall be entitled upon
surrender to receive from OraLabs a certificate representing the number of
OraLabs Shares to which such holder shall be entitled for each Mergerco Share so
surrendered. Until so surrendered, the outstanding certificates which, prior to
the Effective Date, represented Mergerco Shares shall be deemed for all
corporate purposes to evidence ownership of OraLabs Shares into which such
Mergerco Shares shall have been converted.
(b) The 15,597,399 Outstanding OraLabs Shares shall be converted by
virtue of the Merger, and at the Effective Date, into a total of 15,597,399 SSI
Common Shares without any action on the part of the holders thereof on the basis
of one SSI Common Share for each OraLabs Common Share. After the Effective Date,
each holder of OraLabs Shares outstanding prior to the Merger shall be entitled
upon surrender to receive from SSI a certificate representing the number of SSI
Common Shares to which such holder shall be entitled for each OraLabs Common
Share so surrendered, which certificate shall contain any appropriate
restrictive legend concerning the resale of such SSI Common Shares. Until so
surrendered, the outstanding certificates which, prior to the Effective Date,
represented OraLabs Shares shall be deemed for all corporate purposes to
evidence ownership of SSI Common Shares into which such OraLabs Shares shall
have been converted. Upon such surrender, the OraLabs Shares so surrendered
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist.
- 24 -
Fractional shares shall be determined based upon the total shares held by each
holder, regardless of the number of certificates representing such OraLabs
Shares. SSI also shall assume all obligations to issue shares under the Stock
Plan, such assumption to be on a share-for-share basis and be subject, as to
incentive stock options under the Stock Plan, to any required shareholder
approval of SSI.
(c) There shall be no change in the ownership of the Outstanding SSI
Common Shares from that in existence immediately prior to the Merger.
(d) The separate existence and corporate organization of Mergerco,
except insofar as it may be continued by statute, shall cease on Effective Date
and OraLabs shall become a wholly owned subsidiary of SSI.
8. Finder; Lock-ups. (a) In consideration for the assistance of the Finders
in introducing certain of the parties to the Merger, SSI at the Closing shall
issue and deliver to the Finders, as and for their finders' fee, a total of
250,000 SSI Common Shares as follows: (A) Xxxxxx, 156,250 shares, (B) Xxxxxxxx
Xxxxxxxxx, 46,875 shares and (C) X'Xxxxxxx, 46,875 shares ("Finder's Fee
Shares"). In connection therewith, the recipients acknowledge hereby or by
separate letter that the Finder's Fee Shares are being acquired for investment
only and not with a view to the public sale or distribution thereof. Each such
person shall further consent to the placing of an appropriate investment legend
thereon. Xxxxxxxxx hereby agrees to cause SSI to cause the Finder's Fee Shares
to be so issued and delivered directly to the Finders or its designees upon
consummation of the Merger. All such issuances to the Finders or its designees
shall be in compliance with applicable securities laws and regulations.
(b) Each of Xxxxxx and X'Xxxxxxx shall, prior to Closing, execute and
deliver "lock-up" agreements (the "SSI Lock-Ups"), in form and substance
- 25 -
satisfactory to the parties hereto and Messrs. Xxxxxx and X'Xxxxxxx, pursuant to
which one-half of each of their holdings of SSI Common Stock (in the case of
Xxxxxx, 294,853 shares, in the case of X'Xxxxxxx, 297,053 shares) will not be
sold, transferred or otherwise disposed of for one year after the Effective
Date, except to the extent such restriction is waived by OraLabs.
9. [intentionally omitted]
10. Rights and Liabilities of Surviving Corporation. On and after the
Effective Date, OraLabs, as the surviving corporation, shall succeed to and
possess, without further act or deed, all of the estate, rights, privileges,
powers, and franchises, both public and private, and all of the property, real,
personal, and mixed, of each of the Constituent Corporations; all debts due to
either of the Constituent Corporations on whatever account shall be vested in
OraLabs; all claims, demands, property, rights, privileges, powers, and
franchises and every other interest of either of the Constituent Corporations
shall be as effectively the property of OraLabs as they were of the respective
Constituent Corporations; the title to any real estate by deed or otherwise in
either of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger, but shall be vested in OraLabs; all rights of
creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, limited in lien to the property
affected by such lien at the Effective Date; all debts, liabilities, and duties
of the respective Constituent Corporations shall thenceforth attach to OraLabs
and may be enforced against it to the same extent as if such debts, liabilities,
and duties had been incurred or contracted by it; and OraLabs shall indemnify
and hold harmless SSI and the officers and directors of each of the Constituent
Corporations against all such debts, liabilities, and duties and against all
- 26 -
claims and demands arising out of the Merger, exclusive of such that arise as a
primary and direct result of the Private Placement or a breach by SSI of any of
its obligations or representations and warranties herein.
11. Further Assurances of Title. As and when requested by OraLabs or by its
successors or assigns, Mergerco shall execute and deliver or cause to be
executed and delivered all such deeds and instruments and will take or cause to
be taken all such further action as OraLabs may deem necessary or desirable in
order to vest in and confirm to OraLabs title to and possession of its property
acquired by OraLabs by reason or as a result of the Merger and otherwise to
carry out the intent and purposes hereof, and the officers and directors of
Mergerco and OraLabs are fully authorized in the name of Mergerco, OraLabs or
otherwise to take any and all such action.
12. Conditions of Obligations of Mergerco and SSI. The obligation of
Mergerco and SSI to consummate the Merger is subject to the following conditions
prior to the Effective Date:
(a) That OraLabs has suffered no uninsured loss on account of fire,
flood, accident, or other calamity of such a character as to interfere
materially with the continuous operation of its business or materially affect
adversely its condition, financial or otherwise, regardless of whether or not
such loss shall have been insured.
(b) That no material transactions shall have been entered into by
OraLabs other than transactions in the ordinary course of business between
December 30, 1996 and the Effective Date, other than as referred to in this
Agreement or in the schedules annexed, except with the prior written consent of
Mergerco.
(c) Except as disclosed in this Agreement or in the schedules annexed,
that no material adverse change in the aggregate shall have occurred in the
financial condition of OraLabs since December 30, 1996.
- 27 -
(d) That none of the properties or assets of OraLabs shall have been
sold or otherwise disposed of other than in the ordinary course of business
during such period, except with the written consent of Mergerco.
(e) That OraLabs shall have performed and complied with the provisions
and conditions of this Agreement on their respective part to be performed and
complied with, and that the representations and warranties made by OraLabs and
Xxxxxxxxx in this Agreement are true and correct, both when made and as of the
Effective Date.
(f) That this Agreement and the transactions contemplated hereby shall
have been approved by appropriate corporate action of OraLabs and that corporate
votes and resolutions to that effect in form and substance reasonably
satisfactory to Mergerco and its counsel have been delivered to Mergerco.
(g) That there shall have been full compliance with the applicable
securities or "blue sky" laws and regulations of any state or other governmental
body having jurisdiction over the Merger.
(h) That the parties shall have used their best efforts and hereby
agree to use their best efforts after the Effective Date to consummate the
Private Placement within 30 days thereafter.
(i) That Mergerco and SSI shall have received an opinion from counsel
to OraLabs in form satisfactory to SSI's and Mergerco's counsel, that
(1) OraLabs has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Colorado with full
corporate power and authority to own and operate its properties and to carry on
its current and proposed business. OraLabs is not qualified as a foreign
- 28 -
corporation in any other jurisdiction and the failure to so qualify does not
have a material adverse effect on the business, properties or operations of
OraLabs.
(2) OraLabs has an authorized and outstanding capitalization as
described in this Agreement.
(3) The Outstanding OraLabs Shares are the only shares of outstanding
capital stock of OraLabs, to such counsel's best knowledge have been duly and
validly issued and are fully paid and non-assessable and to such counsel's best
knowledge do not have any preemptive rights, subscription rights, rights of
first refusal or similar rights applicable thereto. Based upon a review of
OraLabs' stock records, the only shareholders of record of OraLabs are
Xxxxxxxxx, [fill in additional names] and, to such counsel's best knowledge, the
only beneficial owners of OraLabs Shares other than the beneficial owners of
interests in Xxxxxxxxx.
(4) This Agreement has been duly authorized, executed and delivered by
OraLabs and is a valid and binding obligation of OraLabs legally enforceable
against OraLabs in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights now or hereafter in
effect and to general equitable principles.
(5) Neither the execution, delivery or performance of this Agreement
nor the consummation of the transactions herein contemplated, nor compliance
with the terms hereof by OraLabs, do or will conflict with or result in a breach
of (any of the following in a manner which might have a material adverse effect
on the business of OraLabs or might restrict or impair OraLabs' ability to
consummate the transactions): (i) any of the terms or provisions of, or
constitute a default under the Certificate of Incorporation, as amended, or the
Bylaws, as amended, of OraLabs; or (ii) any indenture, mortgage, deed of trust
or other agreement or instrument to which such counsel knows, after due inquiry
of the officers and directors of OraLabs, OraLabs is a party or by which, to the
knowledge of such counsel after due inquiry of the officers and directors of
OraLabs, it or any of its assets or properties is bound; and (iii) any of the
terms or provisions of, or constitute a default under any law, order, rule or
regulation, judgment, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over OraLabs
or its business or any of its properties, to which such counsel knows, after due
inquiry of the officers and directors of OraLabs, it or any of its assets is
subject. No consent, approvals, authorizations or orders of agencies, officers
or other regulatory authorities are necessary for the consummation of the
Merger, except under state securities or "blue sky" laws, as to which no opinion
is expressed.
(6) This Agreement and the transactions contemplated hereby have been
duly authorized by appropriate corporate action of OraLabs and that upon
consummation of the Merger, SSI will be the sole owner of all of the issued and
outstanding common shares and other capital stock of OraLabs; and there will be
no other outstanding OraLabs Shares, no outstanding rights, options or warrants
to purchase OraLabs Shares, and no outstanding securities of any nature
- 29 -
convertible into OraLabs Shares, including without limitation any OraLabs
Preferred Shares, except for shares to be issued upon exercise of stock options
pursuant to the Stock Plan.
(7) Based upon a review of the stock records of OraLabs and upon
certificates of officers of OraLabs, there have been no purchasers of OraLabs'
securities during the period commencing six months prior to the date of this
Agreement and ending on the Effective Date except to those individuals referred
to in Paragraph 3 of such opinion.
(8) The business of OraLabs does not require it to be registered as an
investment company or an investment adviser under the Investment Company Act of
1940 or the Investment Advisers Act of 1940.
(9) OraLabs has in all respects terminated its status as a Subchapter
S corporation and is a valid and subsisting Subchapter C corporation.
(j) The Employment Agreement contemplated to be entered into by and
between Xxxx Xxxxxxxxx and SSI, including a three-year term and a one-year
noncompetition clause in the event of termination or expiration thereof and in
the form annexed hereto as Exhibit B (the "Xxxxxxxxx Employment Agreement")
shall have been executed and delivered by the parties thereto.
(m) SSI shall have authorized the granting of no more than 450,000
options to purchase OraLabs Common Shares or SSI Common Shares to key employees
or others at an exercise price of $.50 per share (the "SSI Options"), such share
numbers and exercise price being subject to adjustment in the event of stock
splits, stock dividends, recapitalizations and the like.
(n) [Intentionally omitted.]
(o) OraLabs shall have terminated its status as a Subchapter "S"
corporation under the Code and shall be a valid and subsisting "C" corporation
on the Effective Date.
(p) The SSI Lock-Ups shall have been executed and delivered by the
parties thereto.
- 30 -
Compliance with the provisions of this paragraph shall be evidenced by the
certificate of the President and Secretary of OraLabs.
13. Conditions of Obligations of OraLabs. The obligations of OraLabs to
consummate the Merger are subject to the following conditions prior to the
Effective Date:
(a) That neither Mergerco nor SSI shall have suffered any loss on
account of fire, flood, accident, or other calamity of such a character as to
interfere materially with the continuous operation of its business or materially
affect adversely its condition, financial or otherwise, regardless of whether or
not such loss shall have been insured.
(b) That no material transactions shall have been entered into by
Mergerco or SSI other than transactions in the ordinary course of business since
November 30, 1996, other than as referred to in this Agreement, except with the
prior written consent of OraLabs.
(c) That no material adverse change shall have occurred in the
financial condition of either Mergerco or SSI since November 30, 1996 other than
as referred to in this Agreement.
(d) That none of the properties or assets of Mergerco or SSI shall
have been sold or otherwise disposed of other than in the ordinary course of
business since November 30, 1996, except with the written consent of OraLabs.
(e) That Mergerco and SSI shall each have performed and complied with
the provisions and conditions of this Agreement on its part to be performed and
complied with and that the representations and warranties made by Mergerco and
SSI herein are true and correct.
(f) That SSI's Board of Directors, other than Xxxxxxxx Xxxxxx, shall
have resigned as directors and officers effective upon the Merger, immediately
after such resignations, Xxxxxxxx Xxxxxx shall elect Xxxx Xxxxxxxxx and Xxxxx
- 31 -
Xxxxxxxxx as directors to fill the vacancies created by such resignations, and
Xxxxxxxx Xxxxxx thereupon shall resign as a director and officer.
(g) That the parties shall have used their best efforts and hereby
agree to use their best efforts after the Effective Date to consummate the
Private Placement within 30 days thereafter.
(h) That OraLabs shall have received an opinion from counsel to SSI
and Mergerco in form satisfactory to OraLabs' counsel, provided, that OraLabs'
counsel shall provide that portion of the opinion relating to Mergerco; that
(1) Mergerco has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Colorado with full
corporate power and authority to own and operate its properties and to carry on
its current and proposed business. Mergerco is not qualified as a foreign
corporation in any other jurisdiction and the failure to so qualify does not
have a material adverse effect on the business, properties or operations of
Mergerco.
(2) SSI has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of New York with full
corporate power and authority to own and operate its properties and to carry on
its current and proposed business. SSI is not qualified as a foreign corporation
in any other jurisdiction and the failure to so qualify does not have a material
adverse effect on the business, properties or operations of SSI.
(3) All of the issued and outstanding SSI Common Shares, as well as
the SSI Common Shares to be issued to Mergerco and the Finders as contemplated
by this Agreement, have been or will be duly authorized and validly issued,
represent fully paid and nonassessable SSI Common Shares, and to such counsel's
knowledge do not have any preemptive rights, subscription rights, rights of
first refusal or similar rights applicable thereto. Each of SSI and Mergerco has
an authorized and outstanding capitalization as described in this Agreement.
(4) The Outstanding Mergerco Shares have been duly authorized and
validly issued, are fully paid and non-assessable and represent all of the
capital shares of Mergerco.
(5) This Agreement has been duly authorized, executed and delivered by
SSI and Mergerco and is a valid and binding obligation of Mergerco and SSI,
legally enforceable in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization and other laws of general
- 32 -
applicability relating to or affecting creditors' rights now or hereafter in
effect and to general equitable principles.
(6) This Agreement and the transactions contemplated hereby have been
duly authorized by appropriate corporate action of Mergerco and SSI and no
shareholder of SSI is entitled to appraisal rights with respect to the Merger
contemplated by this Agreement.
(7) Neither the execution, delivery or performance of this Agreement
nor the consummation of the transactions herein contemplated, nor compliance
with the terms hereof by SSI, do or will conflict with or result in a breach of
(any of the following in a manner which might have a material adverse effect on
the business of SSI or might restrict or impair SSI' ability to consummate the
transactions): (i) any of the terms or provisions of, or constitute a default
under the Certificate of Incorporation, as amended, or the Bylaws, as amended,
of SSI; or (ii) any indenture, mortgage, deed of trust or other agreement or
instrument to which such counsel knows, after due inquiry of the officers and
directors of SSI, SSI is a party or by which, to the knowledge of such counsel
after due inquiry of the officers and directors of SSI, it or any of its assets
or properties is bound; and (iii) any of the terms or provisions of, or
constitute a default under any law, order, rule or regulation, judgment, writ,
injunction or decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over SSI or its business or any of its
properties, to which such counsel knows, after due inquiry of the officers and
directors of SSI, it or any of its assets is subject. No consent, approvals,
authorizations or orders of agencies, officers or other regulatory authorities
are necessary for the consummation of the Merger, except under state securities
or "blue sky" laws, as to which no opinion is expressed.
(i) The Xxxxxxxxx Employment Agreement shall have been executed and
delivered by the parties thereto.
(j) SSI shall have authorized the granting of the SSI Options.
(k) [Intentionally omitted.]
(l) The SSI Lock-Ups shall have been executed and delivered by the
parties thereto.
(m) The officers and directors of SSI shall have resigned their
positions effective upon the Merger after increasing the size of the SSI Board
of Directors to six persons and electing three individuals chosen by OraLabs to
fill such vacancies effective upon the Merger.
- 33 -
(n) Immediately prior to the effectiveness of the Merger, but without
giving effect to the consummation of the Private Placement, SSI will have a net
worth (assets less liabilities) of at least $155,000, with cash of at least
$180,000.
Compliance with the provisions of this paragraph shall be evidenced by the
certificate of the President and Secretary of SSI and the certificate of the
President and Secretary of Mergerco, each as to itself, to be delivered at
Closing.
14. Abandonment. This Agreement and the Merger may be abandoned (a) by
either Constituent Corporation, acting by its Board of Directors, at any time
prior to its adoption by the shareholders of both of the Constituent
Corporations as provided by law, (b) by either Constituent Corporation, acting
by its Board of Directors, at any time in the event of the failure of any
condition in favor of such Constituent Corporation to which the consummation of
the Merger is subject, or (c) by the mutual consent of the Constituent
Corporations, acting each by its Board of Directors, at any time after such
adoption by such shareholders and prior to the Effective Date. In the event of
abandonment of this Agreement, the same shall become wholly void and of no
effect and there shall be no further liability or obligation hereunder on the
part of either of the Constituent Corporations, its Board of Directors or any
other party to this Agreement.
15. Private Placement; Closing or Termination. The closing of this
Agreement shall take place prior to the closing of the Private Placement. The
parties agree to use their best efforts to consummate the Private Placement
within 30 days after the Effective Date. In the event the Closing of this
Agreement shall not take place by June 1, 1997, then any party shall have the
right to terminate this Agreement (unless such failure to close shall be the
fault of such terminating party) in which event no party shall have any further
right or obligation as against any other.
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16. Delivery of Corporate Proceedings of SSI. At the Closing, SSI shall
deliver to OraLabs' counsel the originals of all of the corporate proceedings of
SSI, duly certified by its Secretary, relating to this Agreement.
17. Delivery of Corporate Proceedings of Mergerco. At the Closing, Mergerco
shall deliver to OraLabs' counsel the originals of all of the corporate
proceedings of Mergerco, duly certified by its Secretary, relating to this
Agreement.
18. Delivery of Corporate Proceedings of OraLabs. At the Closing, OraLabs
shall deliver to Mergerco's counsel a copy of its corporate proceedings relating
to this Agreement or taken pursuant to the provisions of this Agreement duly
certified by its Secretary.
19. Further Agreements. Within 15 days after the Effective Date, SSI shall
file an appropriate Form 8-K Current Report with respect to the Merger pursuant
to the Securities Exchange Act of 1934, as amended. SSI shall thereafter file
such audited and other financial statements pursuant to the requirements of Form
8-K, such financial statements to be filed within the time period set forth in
Form 8-K.
20. Preparation of Private Placement Documents. The parties hereto hereby
acknowledge to each other that those portions of the offering materials relating
to the Private Placement which relate to OraLabs' business (the "OraLabs
Offering Information") have been prepared by OraLabs and its counsel and that
neither SSI, Mergerco, the Finders nor their counsel, officers, directors,
affiliates or associates has participated in the preparation thereof. OraLabs
and Xxxxxxxxx agree to indemnify and hold harmless SSI, Mergerco, the Finders,
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their counsel, officers, directors, affiliates and associates, against any and
all losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Securities Act or any other statute or
at common law and to reimburse persons indemnified as above for any legal or
other expense (including the cost of any investigation and preparation and
reasonable attorneys' fees and expenses) incurred by them in connection with any
litigation or threatened litigation, whether or not resulting in any liability,
but only insofar as such losses, claims, liabilities and litigation arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact required to be stated in the OraLabs Offering Information or necessary to
make the statements therein not misleading, or omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading; provided however,
that this indemnity shall not apply to amounts paid in settlement of any such
litigation if such settlement is effected without the consent of OraLabs, which
consent shall not be unreasonably withheld or delayed, nor shall it apply in
respect of any such losses, claims, damages, liabilities or actions arising out
of, or based upon any such untrue statement or alleged untrue statement, or any
such omission or alleged omission, if such statement or omission was made in
reliance upon information furnished in writing to OraLabs by SSI or Mergerco
specifically for use in connection with the preparation of the OraLabs Offering
Information or any such amendment thereof or supplement thereto. SSI, Xxxxxx and
X'Xxxxxxx each agrees to indemnify, in the same manner as indicated above,
OraLabs and its counsel, officers, directors, affiliates and associates with
respect to those portions of the OraLabs Offering Information which relate to
SSI and with respect to the actions or omissions of SSI or its agents with
respect to the conduct of the offering.
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21. Limitation of Liability. The representations and warranties made by any
party to this Agreement are intended to be relied upon only by the other parties
to this Agreement and by no other person. Nothing contained in this Agreement
shall be deemed to confer upon any person not a party to this Agreement any
third party beneficiary rights or any other rights of any nature whatsoever,
other than the Finders, and only to the extent expressly referred to herein.
22. Further Instruments and Actions. Each party shall deliver such further
instruments and take such further action as may be reasonably requested by any
other in order to carry out the intents and purposes of this Agreement.
23. Governing Law. This Agreement is being delivered and is intended to be
performed in the State of New York and shall be construed and enforced in
accordance with the laws of such State.
24. Notices. All notices or other communications to be sent by any party to
this Agreement to any other party to this Agreement shall be sent by certified
mail (which shall be deemed received three days after depositing with the U.S.
mails), nationwide overnight delivery service (which shall be deemed received
one business day after deposit) or by personal delivery (which shall be deemed
received upon delivery thereof) to the addresses hereinbefore designated, or
such other addresses as may hereafter be designated in writing by a party.
25. Binding Agreement. This Agreement represents the entire agreement among
the parties hereto with respect to the matters described herein and is binding
upon and shall inure to the benefit of the parties hereto and their legal
representatives, successors and permitted assigns. This Agreement may not be
assigned and, except as stated herein, may not be altered or amended except in
writing executed by the party to be charged.
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26. Counterparts. This Agreement may be executed in counterparts, all of
which, when taken together, shall constitute the entire Agreement.
27. Severability. The provisions of this Agreement shall be severable, so
that the unenforceability, validity or legality of any one provision shall not
affect the enforceability, validity or legality of the remaining provisions
hereof.
28. Tax-Free Reorganization. The parties intend that the Merger constitute
a tax-free reorganization under Section 368(a)(1)(A) of the Code.
29. Press Releases and Announcements. Neither party shall make any
announcement or press release concerning the transactions contemplated hereby
without the prior consent of the other parties hereto, which consent shall not
be unreasonably withheld or delayed. Nothing herein, however, shall restrict any
party from discharging any legal obligations to make any such disclosure,
including any obligations under the Exchange Act.
30. Joint Drafting. This Agreement shall be deemed to have been drafted
jointly by the [remainder of page intentionally left blank]
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parties hereto, and no inference or interpretation against any party shall be
made solely by virtue of such party allegedly having been the draftsperson of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have made and executed this
Agreement as of the day and year first above written.
ORALABS, INC.
By: /S/ XXXX XXXXXXXXX
---------------------------------------
Xxxx Xxxxxxxxx, President
SSI CAPITAL CORP.
By: /S/ XXXXXX X'XXXXXXX
----------------------------------------
Xxxxxx X'Xxxxxxx, President
ORALMERGE INC.
By: /S/ XXXX XXXXXXXXX
---------------------------------------
Xxxx Xxxxxxxxx, President
/S/ XXXX XXXXXXXXX
-------------------------------------------
XXXX XXXXXXXXX, individually
/S/ XXXXXXXX XXXXXX
-------------------------------------------
XXXXXXXX XXXXXX, individually
/S/ XXXXXX X'XXXXXXX
-------------------------------------------
XXXXXX X'XXXXXXX, individually
- 40 -
SCHEDULE 1
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
Being delivered separately and incorporated by reference herein.
- 41 -
INDEX TO EXHIBITS
EXHIBIT A ARTICLES OF MERGER
EXHIBIT B EMPLOYMENT AGREEMENT OF XXXX XXXXXXXXX
- 42 -
IDENTIFICATION OF SCHEDULES OMITTED FROM
MERGER AGREEMENT AND PLAN OF REORGANIZATION
Schedule A and Exhibit A have been omitted from the filing of this Merger
Agreement and Plan of Reorganization. The omitted documents include information
provided as disclosure items to the Registrant with respect to various
representations made within the Merger Agreement, and the Articles of Merger. In
accordance with the provisions of Item 601(b)(2) of Regulation S-K, the
Registrant agrees to furnish supplementally a copy of this omitted schedule to
the Commission upon request.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is dated for reference purposes
only April 25, 1997, and is by and between ORALABS, INC., a Colorado corporation
(the "Company" or the "Employer") and XXXX XXXXXXXXX (the "Employee").
WHEREAS, the Company desires to be assured of the association and services
of the Employee for the Company; and
WHEREAS, Employee is willing and desires to be employed by the Company, and
the Company is willing to employ Employee, upon the terms, covenants and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
matters described in this Agreement, the adequacy and sufficiency of all of
which consideration is hereby acknowledged, the parties agree as follows:
1. Employment. Effective as of May 1, 1997, the Company hereby employs
Employee and Employee hereby accepts employment as the President and Chief
Executive Officer of the Company, subject to the terms and conditions
hereinafter set forth.
2. Extent of Duties. Employee agrees to devote such time and attention to
the business of the Company as may be required to fulfill the duties of his
position, which is expected to require the Employee to devote a substantial
amount of his working time, efforts, attention and energies. Employee shall not
engage in any other business activity or activities that require significant
personal services by Employee that in the judgment of the Board of Directors of
the Company may conflict with the proper performance of Employee's duties under
this Agreement.
3. Duties. Employee will, in addition to fulfilling his responsibilities in
the capacity of President and Chief Executive Officer of the Company, perform
such functions and duties as the Company may specify or from time to time assign
to him and which are consistent with said positions. Employee shall have full
responsibility and authority for formulating policies and for the management and
operation of the Company, subject to the general direction and control of the
Board of Directors.
4. Term of Employment. (a) The term of this Agreement shall commence
effective May 1, 1997, and continue for a period of three (3) years thereafter
(through and including April 30, 2000), or until Employee's death, or upon the
date that Employee is notified in writing pursuant to Section 4(c)(iii) that his
employment has terminated for good and sufficient cause as defined herein, or
upon a termination by Employee pursuant to Section 19, whichever comes first.
(b) The term "good and sufficient cause" for purposes hereof is
defined as theft, fraud, embezzlement, the willful and continued failure by
Employee substantially to perform his duties hereunder (other than as resulting
from the Employee's incapacity due to physical or mental illness) after demand
for substantial performance delivered by the Company that specifically
identifies the manner in which the Company believes the Employee has not
substantially performed his duties, the willful engaging by the Employee of
misconduct which is materially injurious to the Company, monetarily or
Exhibit B
otherwise, or the willful violation by the Employee of the provisions of this
Agreement. For purposes of this paragraph, no act, or failure to act, on the
part of Employee shall be considered willful unless done or omitted to be done,
not in good faith and without reasonable belief by Employee that his action or
omission was in the best interest of the Company.
(c) Notwithstanding the provisions of Section 4(a), Employee shall not
be deemed to have been terminated for "good and sufficient cause" without: (i)
reasonable notice to Employee setting forth the reasons for the Company's
intention to terminate for "good and sufficient cause"; (ii) an opportunity for
the Employee, together with his counsel, to be heard before the Board of
Directors, and, at Employee's or the Board of Director's discretion, an
arbitration panel in accordance with Section 14 hereof, and (iii) following such
hearing, delivery to the Employee of a notice of termination from the Board of
Directors finding that in the good faith opinion of the Board of Directors,
Employee was guilty of conduct set forth above in the definition of "good and
sufficient cause", specifying the particulars thereof in detail.
5. Disability. This Agreement shall not terminate upon the temporary
disability of the Employee, but the Company may terminate this Agreement upon
the permanent disability of the Employee. For purposes of this Agreement, the
term "disability" shall mean Employee's inability to perform his normal duties
under this Agreement. If the Company and Employee cannot agree within fifteen
(15) days as to the existence of a disability, the determination shall be made
by two (2) physicians, one (1) designated by the Company and one (1) by
Employee. If these two physicians cannot agree, they shall appoint a third
physician and the determination of the majority shall be conclusive and binding
on the Company and Employee. All costs incurred in determining the existence of
a disability shall be shared equally by Company and Employee. The date of
disability shall be the date upon which Employee and the Company agree or the
earliest date upon which the physicians determine that a disability exists,
whichever may apply.
6. Compensation. (a) Employee's salary for services performed under this
Agreement shall initially be at the rate of $80,000 per year for the first year,
$220,000 per year for the second year, and $242,000 per year for the third year,
payable by the Company in equal weekly installments and reduced by applicable
withholding of federal, state and local taxes. This salary may be increased from
time to time in the discretion of the Employer's Board of Directors. If
increased, this salary shall not be decreased thereafter during the term of this
Agreement without the consent of the Employee. The salary provided in this
Section 6 shall in no way be deemed exclusive and shall not prevent Employee
from participating in any other compensation or benefit plan of Employer or from
receiving any other consideration described in this Agreement.
(b) The Board of Directors of the Company may grant bonus compensation
to the Employee from time to time in such amounts and at such times as
determined by the Board of Directors in its discretion.
7. Benefits. In addition to Employee's salary and other compensation,
Employee is entitled to the benefits of any employee group benefit or employee
welfare benefit plan (e.g., medical insurance, term life insurance, retirement
benefits, profit sharing, stock option plans or grants, disability insurance or
similar benefits) which is provided by the Company to any of its employees.
Employee shall be entitled to the same benefits provided under any such plans
that are provided to all of the other employees of the Company as a group.
-2-
8. No Alienation. The benefits provided hereunder shall not be subject to
alienation, assignment, pledge, anticipation, attachment, garnishment,
receivership, execution or levy of any kind, including liability for alimony or
support payments. Any attempt to cause such benefits to be so subject shall not
be recognized, except to the extent required by law.
9. Covenant Not to Compete. During the term of this Agreement and for a
period of one (1) year thereafter, Employee will not participate in any business
competitive to that of the business of Employer, except that Employee may make
passive investments in businesses engaged in such activities provided that any
such investment does not exceed a five percent (5%) equity interest. In
addition, during the term of this Agreement and thereafter, Employee will not
disclose or utilize any trade secrets or proprietary information of the Employer
except within the scope of Employee's employment hereunder.
10. Expenses. Employee shall be entitled to prompt reimbursement for all
reasonable expenses incurred by Employee in the performance of his duties
hereunder.
11. Assignment. This Agreement is for personal services and neither party
may assign or transfer any rights or obligations without the express written
consent of the other.
12. Colorado Law. This Agreement has been made and entered into in the
State of Colorado. This Agreement shall be construed in accordance with the laws
of the State of Colorado.
13. Severability. If it is determined that any provision of this Agreement
is invalid or of no force and effect, this shall not impair the remainder of
this Agreement and all other provisions shall remain in full force and effect.
14. Arbitration. Any controversy or claim arising out of or relating to
this Agreement shall be settled solely by arbitration in the State of Colorado
in accordance with the commercial arbitration rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court have jurisdiction thereof. The parties agree that the
arbitrator shall have the right to award the prevailing party in any controversy
the attorneys' fees and costs incurred by such party in connection therewith.
15. Counsel. Employee represents that he has consulted his own legal
counsel to the extent deemed necessary by Employee, that such counsel has
advised him as to the effect of the terms and conditions of this Agreement, and
Employee acknowledges that legal counsel to the Company does not represent
Employee in connection herewith.
16. Waiver, Complete Agreement and Modification. (a) Waiver of any breach
of this Agreement shall not be construed as a waiver of any subsequent breach of
this Agreement.
(b) This Agreement contains the full and complete agreement between
the parties concerning the employment of Employee, and supersedes all prior
statements, agreements, understandings and representations with respect to the
employment of Employee.
(c) This Agreement may only be modified by written amendment, signed
by the parties.
-3-
17. Survival. Each provision of this Agreement which by its terms is to
apply after the termination of this Agreement shall survive the termination of
this Agreement.
18. Notices. All notices required to be given by this Agreement shall be
made in writing and shall be deemed delivered upon personal delivery to the
party requiring notice or when deposited in the U.S. Mail, postage prepaid,
certified or registered, return receipt requested, addressed to the party
requiring notice at the address set forth on the signature page of this
Agreement or as any party may from time to time specify in writing to the other
party.
19. Termination By Employee. Upon the occurrence of any of the following
events this Agreement may be terminated by the Employee by written notice to
Employer:
(a) the sale by Employer of substantially all of its assets;
(b) the sale, exchange or other disposition, in one transaction or a
series of related transactions, of at least forty percent (40%) of the
outstanding voting shares of Employer;
(c) a decision by Employer to terminate its business and liquidate its
assets;
(d) the merger or consolidation of Employer with another entity or an
agreement to such merger or consolidation or any other type of reorganization;
(e) Employer makes a general assignment for the benefit of creditors,
files a voluntary bankruptcy petition, files a petition or answer seeking a
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any law, there shall have been filed any petition or
application for the involuntary bankruptcy of Employer, or other similar
proceeding, in which an order for relief is entered or which remains undismissed
for a period of thirty days or more, or Employer seeks, consents to, or
acquiesces in the appointment of a trustee, receiver, or liquidator of Employer
or any material party of its assets; or
(f) there are material changes in Employee's duties and
responsibilities without his written consent.
20. Effect of Termination. Except in the case of termination due to
Employee's death, termination by the Employee or Company under this Agreement
may only be effective by the terminating party giving the other party a written
notice of termination, describing the reasons therefor. In the event of
termination by Company for "good and sufficient cause", Employee shall be
entitled to compensation only through the date of the notice of termination
given pursuant to Section 4(c)(iii). In the event of termination due to the
Employee's death, the Employee's estate will be entitled to a death benefit
equal to the total salary remaining to paid for the remaining term of the
Agreement, reduced by life insurance benefits, if any, paid to Employee's estate
under policies (other than group policies) for which the Employer pays all
premiums and Employee's estate is the beneficiary. In the event of a temporary
or permanent disability described in Section 5 above, and regardless of whether
or not the Employer elects to terminate this Agreement, Employee shall be
entitled to receive all compensation accrued and payable during the entire term
of this Agreement regardless of the date of the disability. However, any such
payment shall be reduced by disability insurance benefits, if any, paid to
Employee under policies (other than group policies) for which Employer pays all
premiums and Employee is the beneficiary. In the event of a termination by
-4-
Employee pursuant to Section 19, Employee shall receive a lump sum payment equal
to all of the compensation to which he otherwise would have been entitled had
the Agreement remained in effect for its entire term. Any termination of this
Agreement shall not prejudice any remedy to which the Employee or Company may be
entitled, either at law, equity or under this Agreement.
21. Indemnification. To the fullest extent permitted by applicable law,
Company agrees to indemnify, defend and hold Employee harmless from any and all
claims, liabilities, damages and expenses (including reasonable attorneys' fees)
hereafter arising out of or in connection with the activities of the Company or
its employees, including Employee or other agents in connection with and within
the scope of this Agreement or by reason of the fact that Employee is or was a
director or officer of the Company or any affiliate of the Company. To the
fullest extent permitted by applicable law, Company shall advance to Employee
expenses of defending any such action, claim or proceeding. However, Company
shall not indemnify Employee or defend Employee against, or hold him harmless
from any claims, damages, liabilities or expenses, including attorneys' fees,
resulting from the gross negligence or willful misconduct of Employee. The duty
to indemnify described in this section shall survive the expiration or early
termination of this Agreement as to any claims based on facts or conditions
which occurred or are alleged to have occurred prior to such expiration or
termination.
22. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and expenses in addition to any
other relief to which that party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
set forth below.
COMPANY:
ORALABS, INC., a Colorado corporation
By: /s/ XXXX XXXXXXXXX
---------------------------------------
Director
Date:
------------------------------------
EMPLOYEE:
/s/ XXXX XXXXXXXXX
------------------------------------------
Xxxx Xxxxxxxxx
------------------------------------------
Address
------------------------------------------
Date
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